Insurance plan stirs outrage
A proposal for Citizens to raise rates brings
calls for a
legislative fix .
By TOM ZUCCO and DAVID DeCAMP
Published November 18, 2006
The cause of all the angst is tucked deep
inside Senate Bill 1980, a major piece of insurance reform legislation passed
last May by the Florida Legislature.
Friday, after the St. Petersburg Times
reported that actuaries for Citizens Property Insurance propose an additional
rate hike that averages 55.8 percent for most of its residential policies, and
an average 610 percent increase for its commercial policies, homeowners and many
in the business community reacted with disgust.
And at least one local legislator jumped at
the chance to fix the "fix" in state law that Citizens cites as the reason it
has to seek such a huge rate jump.
Cobbled together in the waning minutes of the
2006 legislative session, the insurance bill includes a provision that requires
Citizens to have rates that factor in the cost of private reinsurance, something
the state-run insurer hasn't bought and doesn't plan to. Citizens is also
required by law to have rates that are noncompetitive, leading to the mammoth
proposed increase in its commercial rates.
Greg Landry, vice president of the Florida
Insurance Council, the state's largest insurance lobbying group, said state law
prohibits Citizens from having artificially low rates, so as not to drive out
the private market.
"You have to have a level playing field,"
Landry said. "One key ingredient is reinsurance costs."
And it was those costs that bumped up
Citizens' residential rates significantly.
"We have to charge adequate rates," Landry
said. "People have been lulled into cheaper coverage rates for a long time."
Thursday, they got a megawatt wakeup call, and
the reaction was swift.
State Sen. Mike Fasano, R-New Port Richey,
said Friday that he has a bill ready to be filed if a special legislative
session is called that will specifically address the Citizens issue.
"It's outrageous that this issue was even put
into a bill and signed into law when all someone had to do was ask if Citizens
was required to buy reinsurance," said Fasano, who voted against the bill.
"Why are they Citizens being forced to come up
with money and raise rates if they have no need to buy reinsurance?"
The answer, Fasano said, is that legislators
were pressured by the insurance lobby to make private insurance more attractive
at the expense of Citizens policyholders.
"I truly believe this issue was pushed by the
insurance industry very late in the session so they could go before (state
regulators) to get huge rate increases as well," Fasano said.
"What's laughable is that the insurance
companies are not even writing new policies."
Fasano hopes regulators won't approve the
rates, which is unlikely because it is now law.
"Then it's up to the Legislature to act prior
to March 1," Fasano said, "and the simple solution is to repeal the two
provisions in Senate Bill 1980."
Earlier, Gov. Jeb Bush said he was reluctant
to seek a special session unless lawmakers could craft measures that would lead
to rate relief next year.
Fasano said that based on conversations Friday
with legislators including in-coming Senate President Ken Pruitt, R-Port St.
Lucie, he believes there will be a special session, called either by Bush in
December, or early in 2007 by Gov.-elect Charlie Crist.
"We've got time to rectify this. If not,
you'll see economic chaos in Tampa Bay and across the state like you've never
seen before," Fasano said.
At least some of that chaos, business leaders
agree, will be the result of a crisis in the commercial market that would only
worsen with a 610 percent increase in Citizens commercial rates. Citizens has
1.3-million residential policies, but just 16,827 commercial policies, most of
them small businesses along the coast.
But many of those businesses are already
struggling.
"It's atrocious for businesses," said Craig
West, president of the Clearwater Beach Chamber of Commerce. "Most small
businesses are leasing their space, so they're looking at costs passed down to
them by the owner of the property."
Few beach communities typify - and rely on - a
homey feel more than Treasure Island, where small, family-owned motels and
businesses hold their own against condominiums.
"But one motel owner had to sell one of his
cottages the other day just to pay his insurance," said Larry Hoffman, president
of the Treasure Island Chamber of Commerce. "If insurance goes up more, it will
run every single small business owner out of here.
And if the small businesses leave, Hoffman
said, it will have a negative effect on tourism.
"It's out of control and needs immediate
attention by the governor and the Legislature." Hoffman said. "They campaigned
on the issue, and we're all going to hold their feet to the fire."
Tom Zucco can be reached at
zucco@sptimes.com or (727)893-8247.
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